Does venture capital pay off? A meta-analysis on the relationship between venture capital investment and firm performance

Venture capital (VC) has attracted a great amount of interest among researchers and practitioners. Yet, it remains unclear whether, how and under which conditions VC investments facilitate the development of funded firms. Theoretical propositions suggest conflicting signaling and substantive effects. In order to address the controversy and shed light on the true relationship between VC and firm performance we conduct a meta-analysis. Our results show that a small positive performance effect of VC investment on funded firm performance exists. However, the effect vanishes if researchers control for industry selection effects. Moreover, a large part of the variance in empirical results can be attributed to context-related variables. Our findings indicate the importance of context dependent signaling effects. We discuss our findings with respect to theoretical and practical implications.